New Cuba Trade Rules

Well, it could have been worse I suppose. While not as strident as Candidate Trump’s campaign rhetoric regarding Cuba, the National Security Presidential Memorandum on Strengthening the Policy of the United States Toward Cuba certainly raised the possibility of substantial cutting back of the previous administration’s trade initiatives toward Cuba.

The implementing changes adopted by the Treasury (Office of Foreign Assets Control) and Commerce (Bureau of Industry and Security) Departments are relatively modest, as it turns out, leaving the earlier trade expansion measures largely intact.

OFAC Peels Back Authorized Financial and Travel Activities

The first change is OFAC’s imposition of restrictions on direct financial transactions with “entities and subentities that are under the control of, or act for or on behalf of, the Cuban military, intelligence, or security service or personnel, and with which direct financial transactions would disproportionately benefit the Cuban military, intelligence, or security services or personnel at the expense of the Cuban people or private enterprise in Cuba,” as identified by the State Department’s “Cuba Restricted List”.  A “direct financial transaction” is one for which the “ultimate beneficiary is an entity or subentity on” that list. Payments are permitted for pending travel or commercial transactions that had been authorized under the previous rules.

OFAC also provided new conditions on certain types of authorized travel. Wayfarers to Cuba under the “people-to-people educational travel” authorization are now required to “engage in a full-time schedule of activities that result in meaningful interaction with individuals in Cuba and that enhance contact with the Cuban people, support civil society in Cuba, or promote the Cuban people’s independence from Cuban authorities.” Just between us, my view is that the broad scope of the previous “people-to-people” provision in practice flouted the statutory prohibition on tourism in Cuba by U.S. residents.

Additionally, both “people-to-people educational travel” and academic “educational travel” henceforth must “be conducted under the auspices of an organization that is subject to U.S. jurisdiction and that sponsors such exchanges to promote people-to-people contact,” while the travelers must “be accompanied by a person subject to U.S. jurisdiction who is an employee, paid consultant, agent, or other representative of the sponsoring organization.” Since the regulatory definition of “person subject to U.S. jurisdiction” includes foreign enterprises owned by a United States company, the travel’s sponsor may be located in a third country. The individual chaperone must be a “resident of the United States”, however.

BIS Authorizes Expanded Trade

The new BIS rule complements OFAC’s restriction on direct financial dealings with the “Cuba Restricted List,” by clarifying that its policy of export license denial will apply to those same parties. It also expands the list of Cuban government officials who are ineligible to receive merchandise under Export Administration Regulations license exceptions that otherwise apply to Cuba.

The scope of License Exception SCP (“Support for the Cuban People”), on the other hand, has been expanded. The old rule authorized exports and reexports of specific types of articles for use by specific types of private enterprises in Cuba.  Those limitations are removed under amended SCP, which now covers “Items for use by the Cuban private sector for private sector economic activities” as well as “Items sold directly to individuals in Cuba for their personal use or their immediate family’s personal use.”  Excluded from the first authorization are transactions “Primarily generate revenue for the state” or “Contribute to the operation of the state, including through the construction or renovation of state owned buildings;” certain government officials are ineligible for the “personal use” provision.

In short, the wholesale rollback of the Cuban trade initiative that I feared has not occurred. Instead, these changes appear to hone the policy of “empowering” the private sector in Cuba while carving out the government sector from benefits.



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